Monday, 23 November 2015

Think Global, Act Local - How To Sub-optimise Your Global Operation

I think it was sometime in the early 2000s when I first came across the expression "Think Global, Act Local". The phrase has been attributed to Patrick Geddes, a Scottish town planner and social activist, and originated way back in 1915. These days it is a rallying cry for global corporations, and it has appeared in nearly every leadership presentation I have seen over the last 10 years.

At the time, I was working for a major IT outsourcing company, whose business was truly global, and where corporate shared services were already being farmed out to 'low cost centres' across the world. In Applications Development and Maintenance, we were also beginning to talk about 'follow the sun' development, whereby developers would work in relay teams around the world to build software systems 24x7 in a factory model - but that's another story for another day.

I remember being quite excited about the 'Think Global, Act Local' paradigm, mainly because I had my fingers in many pies. I was a member of a number of global task forces looking at various elements of our software development activities, whilst being responsible for all business improvement activities across Europe, and also looking after a team of UK based process improvement experts. And for a while things were hunky dory...we achieved an enormous amount, it was fantastic collaborating with people from all over the world and we actually worked in an environment where people understood how the paradigm should work but more importantly what the limitations were.

When I came across the phrase more recently, I started thinking about how jaded it now seemed, and more importantly how it has been so poorly interpreted by so many management teams that it has probably caused more harm than good. On top of that I realise how naive I was to be taken in by some of these slogans, although I'm pleased that I now finally see them for what they are and that I'm able to think around the consequences of these and other management hypes, although that is largely the result of seeing how things have evolved in the real world, and the problems that have ensued.

I have two main examples of where the paradigm breaks down. Both involve the transfer of work to places with relatively lower cost bases, which is possibly a very desirable thing to do if you are an accountant, but less desirable when seen from other perspectives.

In the first example, let's consider the situation where highly skilled knowledge workers form an operational hub in a low cost region. Depending on the location, it is possible to hire very skilled people (often contractors) at slightly lower rates than they might expect from their home base, but who benefit from the reduced costs of living abroad. The company benefits from lower wages bills and generally lower operating costs by setting up such hubs. A win-win situation it would appear.

It's only when you start working that the problems become evident. And in my experience the single biggest issue is that all collaboration and communication is done electronically. You rarely, if ever, meet the people you support, and your lives are spent working in sound bytes of information, struggling to catch people for a few moments of their time.

In other words, support staff can only provide a sub-optimal service to their front line colleagues. No matter how hard we try, we are limited by the problems inherent using in electronic communication alone - technical issues, misinterpretation of messages, misunderstandings, language issues - all of which are potential issues when working face to face, but compounded horrendously when our only interface to our colleagues is through a computer.

[The irony of this situation is that often the work could easily be done by contractors tele-commuting thereby dispensing with the need for office space and the associated costs of doing business. Personally, I would be perfectly comfortable working from my own home, on a lower day rate, than having to relocate to an office on the continent, incurring the costs of renting an apartment, paying management companies to represent me and still not having face to face collaboration with the people I support]

In the second example, whole functions are relocated to a low cost centre. These are often administrative functions, such as invoicing, procurement or payroll. It may seem quite obvious that these ‘self-contained’ functions can work remotely, servicing requests from across the globe. However, this assumption fails to take into account the biggest single weakness that is inherent across all organisations, regardless of size, longevity and maturity. Most organisational dysfunction occurs at departmental interfaces.

Some organisations have taken this relocation of function to an extreme. Payroll is located in country 'x', procurement is located in country 'y' and invoicing is located in country 'z'. And of course, all the transactions originate locally and then start their long and intricate itinerary across the world. Even some seemingly trivial activities that used to be performed locally in a matter of seconds now take a week or more to fulfil, assuming there are no issues with the original request. If an issue does arise the error has to be backtracked through it's travels and then start all over again.

Many of the organisations who have divested their back office activities across the four corners of the world are simultaneously embarking on 'Lean' and 'Agile' initiatives. Because they have no real understanding of what 'Lean' or 'Agile' really mean, they fail to see the irony of their actions.

Think Global, Act Local, in many respects, is the antithesis of Lean and Agile. Saving money by relocating certain functions at the expense of operational efficiency and effectiveness is almost certainly not going to lead to a net gain against the bottom line. People in higher cost centres are being hindered by the delays in transactions preventing them from realising their own operational effectiveness. Time is spent chasing up requests, often being passed from function to function, as there is no longer any clear overall ownership of the process. In fact, the whole thing smacks of an exercise in job creation, whilst at the same time, hundreds of skilled people with unique domain, customer and product knowledge are being made redundant (before being re-employed as much higher cost contractors).

If businesses took a moment to map out their end to end processes, looking at such things as value chains and process topography and topology, before they shipped out their support functions, they may realise the potential folly of their actions.

As usual, there are more dimensions to executing business processes than that of cost alone! And any Lean expert, worth their salt, will understand that optimising all your sub-functions in isolation, out of context, and without a holistic overview, will lead to the overall process being completely sub-optimised...and probably completely dysfunctional...especially to the people who depend on it!

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